WILMINGTON, N.C., April 26, 2017 (GLOBE NEWSWIRE) — Live Oak Bancshares, Inc. (Nasdaq:LOB) (“Live Oak” or “the Company”) today reported first quarter net earnings available to common shareholders of $6.1 million, or $0.17 per diluted share, compared to $4.7 million, or $0.13 per diluted share, for the first quarter of 2016.  During the first quarter of 2017, the Company completed its acquisition of Reltco, Inc. and National Assurance Title, Inc. (collectively referred to as “Reltco”), two nationwide title agencies under common control based in Tampa, Florida, and incurred merger-related costs of $516 thousand, or $0.01 per diluted share.  The acquisition continues the Company’s growth strategy, including vertical integration.  Also, the Company expanded its financing of the renewable energy sector with the launch of its new solar panel leasing business and recorded the effect of investment tax credits associated with this business in the first quarter of 2017.

“We are very pleased with the first quarter’s results.  Loan and lease originations of $469 million have us well on our way to our 2017 target range of $1.8 to $1.9 billion.  Our recent continued focus in the renewable energy space helped drive strong loan and lease origination performance as well as provide investment tax credits through our solar panel leasing program. We believe the renewable energy business will continue to be a performance driver for years to come.  As reflected in the recent acquisition of Reltco, a national title agency, our platform continues to evolve and allows us to provide best-in-class service to small businesses across the U.S.,” said James S. Mahan, III, Chief Executive Officer of Live Oak.

First Quarter 2017 Key Measures

(Dollars in thousands, except per share data)       Increase (Decrease)    
    Q1 2017   Q1 2016   Dollars   Percent   Q4 2016
Loan production:                    
Loans and leases originated   $ 468,663     $ 284,530     $ 184,133     65 %   $ 514,565  
% Fully funded   63.2 %   40.1 %     n/a     n/a     48.0 %
Loan sales:                    
Guaranteed loans sold   $ 208,715     $ 155,643     $ 53,072     34 %   $ 260,125  
Net gains on sales of loans   18,952     16,425     2,527     15     22,513  
Average net gain on sale of loans, per million sold   90.80     105.53     (14.73 )   (14 )   86.55  
Net interest income and servicing revenues   21,564     13,493     8,071     60     18,060  
Net income attributable to Live Oak Bancshares, Inc.   6,112     4,691     1,421     30     5,480  
Diluted earnings per share   0.17     0.13     0.04     31     0.16  
Non-GAAP net income (1)   6,808     4,691     2,117     45     6,076  
Non-GAAP diluted earnings per share (1)   0.19     0.13     0.06     46     0.17  
                               

(1) See accompanying GAAP to Non-GAAP Reconciliation.

Loans and Leases

Net loans and leases held for investment increased $91.7 million, or 10.3%, to $981.1 million at March 31, 2017, from $889.4 million at December 31, 2016.  Loans held for sale increased $118.2 million, or 30.0%, to $512.5 million at March 31, 2017, from $394.3 million at December 31, 2016. The increase in both portfolios is the result of significant growth in loan and lease origination activities which rose by 64.7% above the prior year level to $468.7 million.  Approximately $19.0 million of leases were originated in the first quarter of 2017.  The combined total loan and lease portfolio at March 31, 2017 and December 31, 2016, of $1.51 billion and $1.30 billion, respectively, were comprised of approximately 63.4% and 66.8% of unguaranteed loans and leases, respectively.  At March 31, 2017, the total loan and lease portfolio of $1.51 billion increased 77.7% above its level of a year ago.

Average loans and leases were $1.42 billion during the first quarter of 2017 compared to $1.21 billion during the fourth quarter of 2016.

Net Interest Income

Net interest income for the first quarter of 2017 increased to $15.6 million compared to $8.7 million for the first quarter of 2016. The increase was driven by the significant growth in the combined held for sale and held for investment loan and lease portfolios attributable to steadily rising loan and lease originations and the Company’s efforts to grow recurring revenue sources by increasing the level of loans and leases on the balance sheet.  Another positive factor was the increase in net interest margin which rose from 3.08% for the fourth quarter of 2016 to 3.76% for the first quarter of 2017.  The net interest margin improved as a result of the increase in the yield on interest earning assets while the rates on interest bearing liabilities remained relatively stable.

Noninterest Income

Noninterest income for the first quarter of 2017 totaled $25.8 million, compared to $22.4 million for the first quarter of 2016.  Net gains on sales of loans increased to $19.0 million in the first quarter of 2017 compared to $16.4 million in the first quarter of 2016 and decreased compared to $22.5 million in the fourth quarter of 2016.  The increase from the prior year was due to a higher volume of loan sales partially offset by a reduction in the average net gain on sale of loans.  The decline from the linked quarter was due to a lower volume of loans sold during the first quarter of 2017 partially offset by an improved average net gain on sale of loans.  Loan servicing revenues rose by $1.1 million from the first quarter of 2016 to $5.9 million.  The addition of Reltco to the Company contributed $1.4 million in noninterest income during the first quarter of 2017.

Noninterest Expense

Noninterest expense for the first quarter of 2017 was $33.0 million compared to $21.7 million for the first quarter of 2016 and $32.4 million for the fourth quarter of 2016. Salaries and employee benefits increased to $18.7 million from $13.0 million for the first quarter of 2016 as a result of increased staffing commensurate with the growth of the business platform.  Total stock based compensation expense in the first quarter of 2017 was $1.8 million compared to $4.4 million for the fourth quarter of 2016 and $659 thousand for the first quarter of 2016.

Professional services expense totaled $1.7 million for the first quarter of 2017 compared to $1.1 million in the fourth quarter of 2016 and $528 thousand in the first quarter of 2016.  The growth in professional services expense over the fourth quarter is primarily attributable to advisory, consulting, and due diligence expenses related to the acquisition of Reltco.

Equipment expense totaled $1.1 million in the first quarter of 2017 compared to $551 thousand for the first quarter of 2016 and $550 thousand in the fourth quarter of 2016 due to increased depreciation expenses related to the shortening of useful lives assigned to current and newly acquired aircraft.

The other expense component of noninterest expense was $3.8 million for the first quarter of 2017 as compared to $1.7 million for the first quarter of 2016.  This increase in other expense was principally related to charitable initiatives of $704 thousand, costs associated with the newly acquired title services business of $700 thousand, and the trade-in of one existing aircraft which resulted in a loss of $206 thousand.

Asset Quality

The unguaranteed exposure of nonperforming loans amounted to $3.6 million at March 31, 2017, compared to $4.8 million at December 31, 2016.  Total nonperforming loans decreased to $22.5 million in the first quarter of 2017 from $23.8 million at the end of the prior quarter.  Total unguaranteed nonperforming loans as a percentage of total loans and leases held for investment declined to 0.36% at March 31, 2017 compared to 0.53% at December 31, 2016.

Foreclosed assets increased $58 thousand to $1.7 million at March 31, 2017, from December 31, 2016.  The unguaranteed exposure of foreclosed assets increased to $304 thousand at March 31, 2017, from $246 thousand at December 31, 2016.

Net charge-offs were $1.5 million in the first quarter of 2017 compared to $813 thousand in the fourth quarter of 2016 and $232 thousand in the first quarter of 2016.  Net charge-offs as a percentage of average held for investment loans and leases, annualized, for the quarters ended March 31, 2017 and 2016 were 0.63% and 0.30%, respectively.

Provision for Loan and Lease Losses

The provision for loan and lease losses for the first quarter of 2017 totaled $1.5 million compared to $3.8 million for the fourth quarter of 2016 and $1.4 million for the first quarter of 2016.  The decline versus the linked quarter is attributable to improvements in industry-specific loss rates and lower levels of required specific reserves on impaired loans combined with the migration to Company-specific loss rates for maturing verticals which was partially offset by an increase in reserves due to loan volume and the effect of higher net charge-offs.

The allowance for loan and lease losses totaled $18.2 million at March 31, 2017, unchanged from December 31, 2016, due to the aforementioned improvements in loss rates.  The allowance for loan and lease losses as a percentage of total loans and leases held for investment was 1.82% at March 31, 2017 compared to 2.01% at December 31, 2016.

Income Tax

Income tax expense in the first quarter of 2017 totaled $798 thousand compared to an income tax expense of $3.3 million in the first quarter of 2016 and an income tax benefit of $3.0 million in the fourth quarter of 2016.  The effective rate of 11.5% in the first quarter of 2017 principally reflected the generation of investment tax credits by the solar panel leasing activity under the Company’s strategic initiatives in the renewable energy sector.  The tax rate also benefited from the adoption of a new accounting pronouncement related to the treatment of share based compensation issued by the Financial Accounting Standards Board that was effective January 1, 2017; “Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting,” also referred to as ASU 2016-09.

Deposits

Total deposits increased by $154.1 million, or 10.4%, to $1.64 billion at March 31, 2017, compared to $1.49 billion at December 31, 2016, following successful deposit gathering campaigns.  Average total interest bearing deposits for the first quarter of 2017 increased $97.0 million, or 6.8%, to $1.53 billion, compared to $1.44 billion for the fourth quarter of 2016. The ratio of average total loans to average interest bearing deposits was 92.7% for the first quarter of 2017, compared to 84.3% for the fourth quarter of 2016.

Conference Call

Live Oak will host a conference call to discuss quarterly results at 9:00 a.m. ET tomorrow morning (April 27, 2017). Media representatives, analysts and the public are invited to listen to this discussion by calling (844) 743-2494 (domestic) or (661) 378-9528 (international) with conference ID 6175653. A live webcast of the conference call along with presentation materials referenced during the conference call will be available on the Investor Relations page of the Company’s website at http://investor.liveoakbank.com. A replay of the webcast will be archived on the Company’s website for one year.  A replay of the conference call will also be available until 5:00 p.m. ET May 5, 2017, and can be accessed by dialing (855) 859-2056 (domestic) or (404) 537-3406 (international).

Important Note Regarding Forward-Looking Statements

Statements in this press release that are based on other than historical data or that express the Company’s plans or expectations regarding future events or determinations are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Statements based on historical data are not intended and should not be understood to indicate the Company’s expectations regarding future events. Forward-looking statements provide current expectations or forecasts of future events or determinations. These forward-looking statements are not guarantees of future performance or determinations, nor should they be relied upon as representing management’s views as of any subsequent date. Forward-looking statements involve significant risks and uncertainties, and actual results may differ materially from those presented, either expressed or implied, in this press release. Factors that could cause actual results to differ materially from those expressed in the forward-looking statements include changes in Small Business Administration (“SBA”) rules, regulations or loan products, including the Section 7(a) program, changes in SBA standard operating procedures or changes in Live Oak Banking Company’s status as an SBA Preferred Lender; changes in rules, regulations or procedures for other government loan programs, including those of the United States Department of Agriculture; a reduction in or the termination of the Company’s ability to use the technology-based platform that is critical to the success of its business model, including a failure in or a breach of operational or security systems; competition from other lenders; the Company’s ability to attract and retain key personnel; market and economic conditions and the associated impact on the Company; operational, liquidity and credit risks associated with the Company’s business; the impact of heightened regulatory scrutiny of financial products and services and the Company’s ability to comply with regulatory requirements and expectations; and the other factors discussed in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) and available at the SEC’s Internet site (http://www.sec.gov). Except as required by law, the Company specifically disclaims any obligation to update any factors or to publicly announce the result of revisions to any of the forward-looking statements included herein to reflect future events or developments.

About Live Oak Bancshares, Inc.

Live Oak Bancshares, Inc. (Nasdaq:LOB) is a financial holding company and the parent company of Live Oak Banking Company, a national online platform for small business lending.

Live Oak Bancshares, Inc.
Quarterly Statements of Income (unaudited)
(Dollars in thousands, except per share data)

    Three months ended
    1Q 2017   4Q 2016   3Q 2016   2Q 2016   1Q 2016
Interest income                    
Loans and fees on loans   $ 19,754     $ 16,239     $ 14,961     $ 12,902     $ 11,005  
Investment securities, taxable   323     292     337     252     251  
Other interest earning assets   342     383     264     248     138  
Total interest income   20,419     16,914     15,562     13,402     11,394  
Interest expense                    
Deposits   4,543     4,283     3,689     3,243     2,444  
Borrowings   235     239     242     242     241  
Total interest expense   4,778     4,522     3,931     3,485     2,685  
Net interest income   15,641     12,392     11,631     9,917     8,709  
Provision for loan and leases losses   1,499     3,844     3,806     3,453     1,433  
Net interest income after provision for loan and lease losses   14,142     8,548     7,825     6,464     7,276  
Noninterest income                    
Loan servicing revenue   5,923     5,668     5,860     5,081     4,784  
Loan servicing asset revaluation   (2,009 )   (3,340 )   (3,421 )   (1,604 )   (26 )
Net gains on sales of loans   18,952     22,513     21,833     14,555     16,425  
Gain on sale of securities available-for-sale           1          
Construction supervision fee income   429     868     502     667     630  
Title insurance income   1,438                  
Other noninterest income   1,020     618     657     649     619  
Total noninterest income   25,753     26,327     25,432     19,348     22,432  
Noninterest expense                    
Salaries and employee benefits   18,682     17,121     17,471     15,411     12,993  
Travel expense   1,598     1,811     2,218     2,330     1,846  
Professional services expense   1,736     1,137     907     910     528  
Advertising and marketing expense   1,485     1,109     1,097     1,365     963  
Occupancy expense   1,195     1,267     1,058     1,055     1,193  
Data processing expense   1,696     1,435     1,252     1,404     1,208  
Equipment expense   1,074     550     611     534     551  
Other loan origination and maintenance expense   1,005     824     806     621     574  
Renewable energy tax credit investment impairment       3,197              
FDIC insurance   726     910     210     148     148  
Other expense   3,788     3,023     1,588     1,354     1,707  
Total noninterest expense   32,985     32,384     27,218     25,132     21,711  
Income before taxes   6,910     2,491     6,039     680     7,997  
Income tax expense (benefit)   798     (2,989 )   2,561     557     3,314  
Net income   6,112     5,480     3,478     123     4,683  
Net loss attributable to noncontrolling interest           1         8  
Net income attributable to Live Oak Bancshares, Inc.   $ 6,112     $ 5,480     $ 3,479     $ 123     $ 4,691  
Earnings per share                    
Basic   $ 0.18     $ 0.16     $ 0.10     $ 0.00     $ 0.14  
Diluted   $ 0.17     $ 0.16     $ 0.10     $ 0.00     $ 0.13  
Weighted average shares outstanding                    
Basic   34,466,904     34,235,375     34,206,943     34,189,217     34,176,753  
Diluted   35,646,918     35,208,433     35,001,817     35,206,125     34,954,592  
                               

Live Oak Bancshares, Inc.
Quarterly Balance Sheets (unaudited)
(Dollars in thousands)

    As of the quarter ended
    1Q 2017   4Q 2016   3Q 2016   2Q 2016   1Q 2016
Assets                    
Cash and due from banks   $ 158,887     $ 238,008     $ 355,485     $ 175,506     $ 226,556  
Certificates of deposit with other banks   6,000     7,250     7,500     8,500     9,000  
Investment securities available-for-sale   68,630     71,056     70,334     66,804     55,674  
Loans held for sale   512,501     394,278     345,277     329,206     537,293  
Loans and leases held for investment   999,270     907,566     766,977     690,517     313,633  
Allowance for loan losses   (18,195 )   (18,209 )   (15,178 )   (12,309 )   (8,616 )
Net loans and leases   981,075     889,357     751,799     678,208     305,017  
Premises and equipment, net   101,398     64,661     60,646     61,064     61,839  
Foreclosed assets   1,706     1,648     2,235     2,971     3,020  
Servicing assets   53,584     51,994     49,729     48,454     47,377  
Other assets   48,344     37,009     26,735     24,591     22,765  
Total assets   $ 1,932,125     $ 1,755,261     $ 1,669,740     $ 1,395,304     $ 1,268,541  
Liabilities and Shareholders’ Equity                    
Liabilities                    
Deposits:                    
Noninterest-bearing   $ 38,029     $ 27,990     $ 28,461     $ 22,942     $ 21,125  
Interest-bearing   1,601,114     1,457,086     1,374,556     1,117,855     994,340  
Total deposits   1,639,143     1,485,076     1,403,017     1,140,797     1,015,465  
Short term borrowings   13,100                  
Long term borrowings   27,473     27,843     28,074     28,173     28,271  
Other liabilities   26,220     19,495     24,497     18,984     20,372  
Total liabilities   1,705,936     1,532,414     1,455,588     1,187,954     1,064,108  
Shareholders’ equity                    
Preferred stock, no par value, 1,000,000 shares authorized, none issued or outstanding                    
Class A common stock (voting)   147,933     149,966     145,284     141,181     138,199  
Class B common stock (non-voting)   50,015     50,015     50,015     50,015     50,015  
Retained earnings   28,938     23,518     18,723     15,928     16,147  
Accumulated other comprehensive (loss) income   (697 )   (652 )   130     201     47  
Total shareholders’ equity attributed to Live Oak Bancshares, Inc.   226,189     222,847     214,152     207,325     204,408  
Noncontrolling interest               25     25  
Total equity   226,189     222,847     214,152     207,350     204,433  
Total liabilities and shareholders’ equity   $ 1,932,125     $ 1,755,261     $ 1,669,740     $ 1,395,304     $ 1,268,541  
                                         

Live Oak Bancshares, Inc.
Quarterly Selected Financial Data
(Dollars in thousands, except per share data)

    As of and for the three months ended
    1Q 2017   4Q 2016   3Q 2016   2Q 2016   1Q 2016
Income Statement Data                    
Net income attributable to Live Oak Bancshares, Inc.   $ 6,112     $ 5,480     $ 3,479     $ 123     $ 4,691  
Per Common Share                    
Net income, basic   $ 0.18     $ 0.16     $ 0.10     $ 0.00     $ 0.14  
Net income, diluted   0.17     0.16     0.10     0.00     0.13  
Dividends declared   0.02     0.02     0.02     0.01     0.02  
Book value   6.54     6.51     6.26     6.06     5.98  
Tangible book value (1)   6.17     6.51     6.26     6.06     5.98  
Performance Ratios                    
Return on average assets (annualized)   1.33 %   1.26 %   0.91 %   0.04 %   1.67 %
Return on average equity (annualized)   10.93     9.95     6.54     0.24     9.38  
Net interest margin   3.76     3.08     3.32     3.26     3.52  
Efficiency ratio (1)   79.69     83.64     73.44     85.88     69.72  
Noninterest income to total revenue   62.21     68.00     68.62     66.11     72.03  
Selected Loan Metrics                    
Loans and leases originated   $ 468,663     $ 514,565     $ 381,050     $ 356,865     $ 284,530  
Guaranteed loans sold   208,715     260,125     210,610     135,555     155,643  
Average net gain on sale of loans   90.80     86.55     103.67     107.37     105.53  
Held for sale guaranteed loans (note amount) (2)   866,260     754,834     692,278     639,356     541,595  
Quarterly increase (decrease) in note amount of held for sale guaranteed loans   111,426     62,556     52,922     97,761     43,720  
Estimated net gain to be recognized on quarterly increase in guaranteed loans held for sale (3)   10,117     5,414     5,486     10,497     4,614  
Asset Quality Ratios                    
Allowance for loan losses to loans and leases held for investment   1.82 %   2.01 %   1.98 %   1.78 %   2.75 %
Net charge-offs (recoveries)   $ 1,513     $ 813     $ 937     $ (240 )   $ 232  
Net charge-offs (recoveries) to average loans and leases held for investment (4)   0.63 %   0.39 %   0.51 %   (0.18 )%   0.30 %
Nonperforming loans   $ 22,469     $ 23,781     $ 14,023     $ 12,902     $ 14,829  
Foreclosed assets   1,706     1,648     2,235     2,971     3,020  
Nonperforming loans (unguaranteed exposure)   3,643     4,784     3,354     2,174     2,421  
Foreclosed assets (unguaranteed exposure)   304     246     304     433     438  
Nonperforming loans not guaranteed by the SBA and foreclosures   3,947     5,030     3,658     2,607     2,859  
Nonperforming loans and foreclosures, not guaranteed by the SBA, to total assets   0.20 %   0.29 %   0.22 %   0.19 %   0.23 %
Capital Ratios                    
Common equity tier 1 capital (to risk-weighted assets)   12.79 %   15.35 %   16.63 %   18.26 %   20.61 %
Total capital (to risk-weighted assets)   14.01     16.60     17.88     19.43     21.54  
Tier 1 risk based capital (to risk-weighted assets)   12.79     15.35     16.63     18.26     20.61  
Tier 1 leverage capital (to average assets)   10.60     12.03     13.18     14.32     17.09  
                               

Notes to Quarterly Selected Financial Data

(1)  See accompanying GAAP to Non-GAAP Reconciliation.

(2)   Includes the entire note amount, including undisbursed funds for the multi-advance loans.

(3)  The estimated revenue from the sale of the quarterly increase in guaranteed loans is based on the average net gain on sale of loans for that quarter. This is an estimate based on the respective quarter activity and does not reflect actual gains to be recognized.

(4)  Quarterly net charge-offs as a percentage of quarterly average loans and leases held for investment, annualized.

Live Oak Bancshares, Inc.
Quarterly Average Balances and Net Interest Margin
(Dollars in thousands)

    Three months ended March 31, 2017   Three months ended December 31, 2016
    Average
Balance
   Interest   Average
Yield/Rate
  Average
Balance
   Interest   Average
Yield/Rate
Interest earning assets:                        
Interest earning balances in other banks   $ 194,176     $ 342     0.71 %   $ 320,270     $ 383     0.48 %
Investment securities   71,075     323     1.84     70,755     292     1.64  
Loans held for sale   466,567     6,521     5.67     369,057     4,995     5.38  
Loans and leases held for investment (1)   955,021     13,233     5.62     841,676     11,244     5.31  
Total interest earning assets   1,686,839     20,419     4.91     1,601,758     16,914     4.20  
Less: allowance for loan and lease losses   (18,199 )           (15,174 )        
Non-interest earning assets   167,644             153,000          
Total assets   $ 1,836,284             $ 1,739,584          
                         
Interest bearing liabilities:                        
Interest bearing checking   $ 44,351     $ 65     0.59 %   $ 28,091     $ 42     0.59 %
Money market accounts   479,545     948     0.80     473,495     887     0.75  
Certificates of deposit   1,009,915     3,530     1.42     935,274     3,354     1.43  
Total interest bearing deposits   1,533,811     4,543     1.20     1,436,860     4,283     1.19  
Other borrowings   28,068     235     3.40     27,969     239     3.40  
Total interest bearing liabilities   1,561,879     4,778     1.24     1,464,829     4,522     1.23  
Non-interest bearing deposits   28,686             28,669          
Non-interest bearing liabilities   22,042             25,816          
Shareholders’ equity   223,677             220,270          
Noncontrolling interest                        
Total liabilities and shareholders’ equity   $ 1,836,284             $ 1,739,584          
                         
Net interest income and interest rate spread       $ 15,641     3.67 %       $ 12,392     2.97 %
                         
Net interest margin           3.76             3.08  
                         
Ratio of average interest-earning assets to average interest-bearing liabilities           108.00 %           109.35 %
                             

(1)  Average loan and lease balances include non-accruing loans.

Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation
(Dollars in thousands)

    As of and for the three months ended
    1Q 2017   4Q 2016   3Q 2016   2Q 2016   1Q 2016
Total shareholders’ equity   $ 226,189     $ 222,847     $ 214,152     $ 207,350     $ 204,433  
Less:                    
Goodwill   7,165                  
Other intangible assets   5,410                  
Tangible shareholders’ equity (a)   $ 213,614     $ 222,847     $ 214,152     $ 207,350     $ 204,433  
Shares outstanding (c)   34,600,819     34,253,602     34,215,050     34,192,382     34,183,878  
Total assets   $ 1,932,125     $ 1,755,261     $ 1,669,740     $ 1,395,304     $ 1,268,541  
Less:                    
Goodwill   7,165                  
Other intangible assets   5,410                  
Tangible assets (b)   $ 1,919,550     $ 1,755,261     $ 1,669,740     $ 1,395,304     $ 1,268,541  
Tangible shareholders’ equity to tangible assets (a/b)   11.13 %   12.70 %   12.83 %   14.86 %   16.12 %
Tangible book value per share (a/c)   $ 6.17     $ 6.51     $ 6.26     $ 6.06     $ 5.98  
Efficiency ratio:                    
Noninterest expense (d)   $ 32,985     $ 32,384     $ 27,218     $ 25,132     $ 21,711  
Net interest income   15,641     12,392     11,631     9,917     8,709  
Noninterest income   25,753     26,327     25,432     19,348     22,432  
Less: gain on sale of securities           1          
Adjusted operating revenue (e)   $ 41,394     $ 38,719     $ 37,062     $ 29,265     $ 31,141  
Efficiency ratio (d/e)   79.69 %   83.64 %   73.44 %   85.88 %   69.72 %
                               

Live Oak Bancshares, Inc.
GAAP to Non-GAAP Reconciliation (Continued)
(Dollars in thousands)

    Three months ended
    3/31/2017   12/31/2016   3/31/2016
Reconciliation of net income to non-GAAP net income for non-routine income and expenses:            
Net income attributable to Live Oak Bancshares, Inc.   $ 6,112     $ 5,480     $ 4,691  
Stock based compensation expense for restricted stock awards with an effective grant date of May 24, 2016, as discussed in Note 10 of our March 31, 2016 Form 10-Q   346     3,365      
Merger costs for acquisition of Reltco   516          
Trade-in loss on aircraft   206          
Impairment charge taken on aircraft held for sale       1,422      
Renewable energy tax credit investment income, impairment and loss   19     3,239      
Income tax effects and adjustments for non-GAAP items *   (435 )   (3,210 )    
Other renewable energy tax expense   44     176      
Renewable energy tax credit       (4,396 )    
Non-GAAP net income   $ 6,808     $ 6,076     $ 4,691  
* Estimated at 40.0%            
Non-GAAP earnings per share:            
Basic   $ 0.20     $ 0.18     $ 0.14  
Diluted   $ 0.19     $ 0.17     $ 0.13  
             
Weighted-average shares outstanding:            
Basic   34,466,904     34,235,375     34,176,753  
Diluted   35,646,918     35,208,433     34,954,592  
             
Reconciliation of financial statement line items as reported to adjusted for non-routine income and expenses:            
Noninterest income, as reported   $ 25,753     $ 26,327     $ 22,432  
Renewable energy tax credit investment income   (10 )   42      
Noninterest income, as adjusted   25,743     26,369     22,432  
             
Noninterest expense, as reported   32,985     32,384     21,711  
Stock based compensation expense   (346 )   (3,365 )    
Merger costs associated with Reltco   (516 )        
Trade-in loss on aircraft   (206 )        
Impairment charge taken on aircraft       (1,422 )    
Renewable energy tax credit investment impairment and loss   (29 )   (3,197 )    
Noninterest expense, as adjusted   31,888     24,400     21,711  
             
Income tax expense (benefit), as reported   798     (2,989 )   3,314  
Income tax effects and adjustments for non-recurring income and expenses   435     3,210      
Other renewable energy tax expense   (44 )   (176 )    
Renewable energy tax credit       4,396      
Income tax expense, as adjusted   $ 1,189     $ 4,441     $ 3,314  
                         

This press release presents the non-GAAP financial measures previously shown. The adjustments to reconcile from the applicable GAAP financial measure to the non-GAAP financial measures are included where applicable in financial results presented in accordance with GAAP. The Company considers these adjustments to be relevant to ongoing operating results. The Company believes that excluding the amounts associated with these adjustments to present the non-GAAP financial measures provides a meaningful base for period-to-period comparisons, which will assist regulators, investors, and analysts in analyzing the operating results or financial position of the Company. The non-GAAP financial measures are used by management to assess the performance of the Company’s business for presentations of Company performance to investors, and for other reasons as may be requested by investors and analysts. The Company further believes that presenting the non-GAAP financial measures will permit investors and analysts to assess the performance of the Company on the same basis as that applied by management. Non-GAAP financial measures have inherent limitations, are not required to be uniformly applied, and are not audited. Although non-GAAP financial measures are frequently used by shareholders to evaluate a company, they have limitations as an analytical tool and should not be considered in isolation or as a substitute for analysis of results reported under GAAP.

CONTACT: Contacts:
Brett Caines | CFO | Investor Relations | 910.796.1645 & Micah Davis | Marketing Director | Media Relations | 910.550.2255